Mortgage loyalty penalty could cost thousands of Brits £1,000 extra each year

Thousands of homeowners are paying an extra £1,000 a year on their mortgages, according to new figures.

Two fifths of Brits whose fixed-term mortgages have ended since the first lockdown have taken no action to switch.

According to Citizens Advice, disabled people and carers were more likely to see a price increase at the end of their fixed term.

The Financial Conduct Authority (FCA) found that it's costing the average household a whopping £1,000 a year.

It also discovered one in five mortgage customers who didn't switch said the process was too difficult or time-consuming.

Many have also been unable to switch due to mental or physical ill health and other pressures resulting from the pandemic.

The charity found a 55-year-old man from Norfolk approached it after losing his job and having to claim Universal Credit benefits.

His fixed-term mortgage was due to end soon, but when he contacted his provider they said he might not be able to switch.

He was also told he would be moved to a standard variable rate (SVR).

The man added: "We're locked into a situation where we cannot move house or re-arrange our mortgage.

"We've never been in debt before or missed a mortgage payment in 10 years, but now we're struggling."

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He continued: "The standard variable rate is likely to be a lot more than what I'm currently paying.

"I feel completely trapped in my mortgage. They offered me a mortgage holiday but I know that this would only be kicking the can down the road and I'd still struggle with the payments once this ended."

Alistair Cromwell, acting chief executive of Citizens Advice, said: "The pandemic has had a devastating impact on household finances. While the FCA acted fast to protect mortgage customers from the more immediate impacts of the pandemic, many will be facing long-term financial difficulty in the months and years to come.

"As the pandemic continues to take its toll on our finances, employment, health and relationships, it's more important than ever that customers aren't penalised for not switching.

"As Covid support schemes come to an end, tackling the loyalty penalty is one way that regulators can protect consumers from unfair and unnecessary costs."

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